Find the future value of a exist160,000 Certificate of Deposit that pays compoun

Question

Find the future value of a exist160,000 Certificate of Deposit that pays compounded interest every six months at the rate of 4% per year. The CD has a term of 5 years. Calculate the FV (Future Value) using the "Future Value or Compound Amount of exist1.00" table in your textbook. Reminder: To use Table 13-1, you need to calculate the Number of Periods and the Interest Rate per Period. Calculate the FV (Future Value) using the formula: FV = P(1 + R)^N Reminder: Always show work. You can do this by stating the values that you are substituting into the formula. How much interest was earned on the investment? Use either the result from Part 2a or Part 2b, since they are slightly different for your calculation.

Explanation / Answer

a) see table 13-1

do the calculation

by multiplying it by 160,000

b)

FV = P (1+ r)^N

P = 160,000

here r = 4% per year = 2% per 6 months = 0.02 , N =5*2 = 10

hence FV = 160,000*(1+0.02)^12 = 202918.687

c)Interest = FV -P

=202918.687 -160,000 = 42918.687

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